Egypt Introduces Incentives Intending to Revive Oil and Gas Production

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Egypt intends, with the assistance of foreign partners and the incentives, to resume its oil and gas production levels starting in 2025

Egypt, the third-largest economy in the Arab world, has announced incentives to increase oil and gas production in response to a local energy crisis and dwindling output.

Karim Badawi, Minister of Petroleum and Mineral Resources, stated that the initiatives include innovative ways to increase production as well as additional exploratory drilling and development activities, as reported by Wam on Wednesday.

According to Mr. Badawi, the increased production will bring in more money to close the gap between local production and consumption and help pay off some of the debt owed to partners in the petroleum sector.

Egypt became self-sufficient in natural gas in 2018 as a result of the discovery and development of the Zohr field off the Mediterranean coast. During the summer, Egypt had recurring power outages and a gas shortage. As a result, the nation in North Africa was able to temporarily turn its natural gas imports into exports.

But in 2022, the nation started to face gas shortages, mostly as a result of the natural decline of wells in the Zohr field, which supplies around 35% of the nation’s total gas output.

The Egyptian government has increased the selling of offshore exploration blocks in an attempt to preserve its standing as a centre for natural gas due to growing local power use and excessive reliance on gas imports.

Based on government data, Egypt produced 5.7 billion cubic feet of gas per day in July. In September 2019, production peaked at 7.2 billion cubic feet per day.

Egypt intends, with the assistance of foreign partners, to resume its oil and gas production levels starting in 2025, according to a statement made by Prime Minister Mostafa Madbouly last week.

“There is a very clear plan to bring the volume of production of oil and natural gas with foreign partners back to previous levels, and to also increase it in the coming period,” Mr, Madbouly stated.

In order to boost the availability of electricity, Mr. Madbouly stated in June that the government had set up $1.18 billion for the importation of heavy fuel oil and natural gas, or mazut.

According to projections made by BMI, a unit of ratings company Fitch, Egypt’s gas output would decline this year as well, albeit more slowly than in 2023.

The drilling of further wells at the Zohr field between 2024 and 2025 will slow down declines. In a June assessment, BMI stated that “the country’s gas production will remain significantly below the peak levels seen in 2022.”

In light of this, it is anticipated that Egypt’s LNG shipments would continue to lag behind previous highs.

Egypt’s LNG shipments fell to 8.9 billion cubic meters in 2023 from 9.2 billion cubic meters the year before, as reported by Statista.

Additionally, Egypt imports natural gas from the offshore gas resources of Leviathan and Tamar in Israel. In 2023, Israel sent 8.6 billion cubic meters of gas to Egypt, a 39% increase from the year before.

On Monday, Egypt was scheduled to ship up to 30,000 tonnes of fuel to Lebanon, which would help ease the country’s ongoing national power outage that started more than a week ago.

According to Lebanon’s Energy Minister Walid Fayad, the fuel can be used right away. Electricite du Liban, a state-run company, purchased it.

New Oil Discovery

A joint venture between the US oil and gas producer Apache and the Egyptian General Petroleum Corporation (EGPC), Khalda Petroleum Company, said on Tuesday that it has discovered oil in the Kalabsha development area of the Egyptian Western Desert.

In addition to producing 23 million cubic feet of natural gas, the well also produced 7,165 barrels of oil per day during early testing.

An oil discovery in the Gulf of Suez’s Geisum and Tawila West concession was announced by Egypt’s Cheiron last year.

Economic Difficulties

Egypt is still having trouble recovering economically as it works through regional tensions and tries to meet the IMF’s strict requirements for a $8 billion loan program.

Egypt’s economy was severely damaged by Russia’s invasion of Ukraine in 2022, although the country averted a complete lockdown during the coronavirus pandemic. This is because Egypt is primarily dependent on wheat exports from both countries.

Egypt’s weak growth in the first half of 2024 has been mostly caused by the ongoing conflict in Gaza and its effects on the region, the IMF stated in a study released on Monday.

Egypt’s largest source of foreign exchange, the Suez Canal, has seen a 60% decline in earnings due to the war, which has also hampered maritime activity in the Red Sea. Additionally, the IMF has recommended significant cuts to state subsidies, especially in the energy sector.

The Egyptian government followed through on its July rise in fuel courts by raising electricity prices by as much as 50% this month.